A lot of my Cody Word readers missed my updated Apple analysis in a post last week, and you let me know that you wanted an update. So here’s everything I got on Apple right now, including a repeat from last week’s post that that you may have missed.
I’m not changing my stance on Apple AAPL +1.33% . I’m holding onto a large common stock position with huge gains that I’ve owned for years and I’m sitting on losses from the recent call options I’d scaled into. I do expect that Apple can and will deliver nearly $60 in earnings this year, and I expect that the market will pay 10X those earnings, plus net cash, which would put the stock up near $750 or $800. And I still expect that we’ll see a $1,000 price in AAPL sometime in 2014 or 2015. There are no sure things though, and that’s why we diversify and clearly our other longs have been huge winners of late even as Apple’s own shareholders have relentlessly sold the stock down here that they loved at $700.
Q. Cody, regarding Apple, there are a number of theories floating around: Shift from growth to value, over-owned by large funds. If I read too much into those, it would feel that Apple would never climb out of this hole. However, I think the key is still Apple’s ability to innovate and generate earnings. The others are just noises. What do you think? Should the shift or limited money available to invest in Apple be a concern?
A. I think the retail shareholders and mindless long money managers just got complacent with AAPL and that we’re still shaking the people who bought AAPL in 2012 out and that could take a while longer. The multiple will be supported by the cash, the yield and the giant earnings that will continue for the next few quarters, so I still think it goes higher eventually.
Q. Cody, as for Apple earnings what was your take and why the plunge in your opinion?
A. I’d written before the AAPL report that the bulls needed $16 a share in earnings to bust out of the bear, and AAPL didn’t quite get there. No shock that these weak handed AAPL longs got sick after the report didn’t “blow ‘em away.”
Q. The consensus in AAPL seems to be around $42. How do you get to $60 in earnings….
A. Look at this page for example. Estimates for this year range from $40 to $63 a share for next year..
Thanks Cody. I looked at the link and I realize that I was talking about the year ending 9/13 and you meant 9/14.
Q. Are you still holding April 650 Calls for Apple, you bought them when they were around $14 and now they are at about $0.39. Do you see an upside in the next few week to recover some losses and then dump them.
A. I am still holding those losers as I noted yesterday. It’ll take a miracle to get those profitable before they expire at this point though. I’m probably not going to bother selling them for less than a buck though, just in case the miracle happens, which over the years AAPL’s been a bit miraculous for me, so who knows. Not a good bet though. Mea culpa.
Q. Cody, so is this a right time to buy AAPL calls you think?
A. I thought that last month was a good time to be buying AAPL calls and I’m still choking on them. As noted yesterday, I’ve sold down almost all my call options of any value and am letting my common stock do the work for me for now.
Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com, which is not affiliated with MarketWatch. At time of publication, Cody was net long Apple. Follow Cody on Twitter at twitter.com/codywillard.